Ukraine successfully passes International Monetary Fund mission
ANASTASIIA ZHARYKOVA – FRIDAY, 17 FEBRUARY 2023, 20:27
On Friday, 17 February, the International Monetary Fund's (IMF) mission to prepare for the revision of the monitoring program ended in Warsaw, as the Fund's representatives and the Ukrainian authorities reached an agreement at the staff level.
Source: a press release on the IMF website
Quote: "This agreement, which is subject to IMF Management approval, paves the way to initiate discussions on a fully-fledged Fund-supported program," the statement said
At the end of the discussions, Gavin Gray, Head of the Mission, said that thanks to the joint efforts of the Ukrainian government and the National Bank, all quantitative and indicative targets for the end of December and all five structural benchmarks for the end of January had been met.
These include the submission to the Parliament of a package of tax laws aimed at increasing revenues, the Ministry of Finance's measures to eliminate arrears, the development of a concept note for the social protection system, the establishment of a supervisory board for Naftogaz [a leading company of the Ukraine’s fuel and energy complex], and the agreement on key elements of the banking sector diagnosis.
Gray stated that in 2022, the Ukrainian economy shrank by 30%, less than previously expected, and inflation began to slow. At the same time, the near-term outlook has deteriorated since the mission was approved in December, including due to attacks on critical infrastructure. Nevertheless, the economy is adjusting, and a gradual economic recovery is expected over the course of the year.
"Timely disbursement of sizable external support has been critical for macroeconomic stability, and large-scale disbursements will remain essential in 2023 and beyond to cover financing needs and help ensure stability. Efforts to expand issuance in the domestic bond market should continue to help ensure a stable financing mix and eliminate reliance on monetary financing," the head of mission stated
The IMF also noted that the National Bank of Ukraine is responding to the excess liquidity in the banking system in a balanced manner.
"Since the outbreak of the war, far-reaching emergency measures introduced under martial law have helped preserve financial stability. Preparations are now underway to gradually unwind emergency measures, with the aim of realigning local norms with international standards," Gavin Gray said
He emphasised that a full-fledged IMF program would support the Ukrainian government's efforts to join the EU. In particular, reform initiatives to improve business productivity and competitiveness should be promoted to help lay the groundwork for strong post-war growth as Ukraine makes progress toward EU accession.
"The authorities are making progress in reforms to strengthen governance, anti-corruption and rule of law, and lay the foundations for post-war growth, although the agenda of reforms in these areas remains significant."
The public sector will play an important role in the post-war recovery process, and measures to improve the efficiency and transparency of public finance and governance will be critical.
The IMF also expects the private sector to contribute to Ukraine's recovery.
"The mission met with NBU Governor Pyshnyi and Finance Minister Marchenko, and other senior public officials, and would like to thank the authorities for the open and constructive discussions. IMF staff look forward to continuing close cooperation in the weeks ahead," the head of mission concluded
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